It has been a bad season for U.S. retail, and the fallout has continued into February. West Seal and Eastern Mountain Sports can be added to the official list of retail chain bankruptcy liquidations. Smaller chains are also part of the trend. Luke’s Locker, which at its peak had at least 10 fitness clothing stores in Texas, plans to emerge from bankruptcy with just three stores. Marbles, a Chicago-based game retailer, will close all of its 37 stores in bankruptcy.
There are worries in general about private equity owned apparel chains because of their debt load. In that category, Gymboree may be in the worst shape. The company is hoping for a $1 billion debt restructuring, and as part of that plan, its CEO is preparing to step down. Discount footwear chain Payless has a smaller debt load but also has smaller margins and may close 20 percent of its 4,500 stores if it can reach a deal on its debt. In the private equity apparel category, J. Crew, Rue 21, True Religion, and Claire’s are mentioned as retailers whose debt load is probably too high to pay off over time. The largest debt crisis in retail could be Toys “R” Us and Babies “R” Us. These chains have already extended most debt payments due this year and next, but have only months remaining to restructure the rest. A lackluster fourth quarter and a security breach at loyalty program Rewards “R” Us during that period won’t help.
Retailers that are doing well in financial terms may still be closing stores. The latest large store-closing announcement came from BCBG, with plans to close 120 stores, mostly in malls. As clothing becomes more durable, it’s expected that consumers will continue to scale back their clothing purchases.
